China factory activity picks up in Aug

BEIJING: China’s factory activity gathered steam in August, official data showed on Thursday, beating expectations, but not dispelling concerns about the headwinds facing the world’s second largest economy.

The figures came as China registered steady inflation but slowing foreign trade growth in the previous month.
The latest purchasing managers index (PMI), a gauge of factory conditions, came in at 51.7 in August, the National Bureau of Statistics (NBS) said, up from the 51.4 reading in July.

Anything above 50 is considered growth while a figure below points to contraction. Analysts surveyed by Bloomberg News had expected a reading of 51.3.

“Manufacturing in general has maintained a steady growth momentum,” NBS analyst Zhao Qinghe said in a statement.

Improvement in both supply and demand as well as a steady rise in imports helped drive manufacturing performance, Zhao said.

“Today’s official PMI readings suggest that industrial output defied a slowdown in the broader economy last month,” Julian Evans-Pritchard of Capital Economics said in a note.

But, “we doubt that the current pace of industrial output growth can be sustained for long,” he said, noting that “tighter policy will continue to weigh on investment spending in the coming quarters.”

“The manufacturing sector is more resilient than many people think,” Raymond Yeung of Australia & New Zealand Banking Group told Bloomberg.

“Electronics supply chains remain supportive while the domestic investment pipeline is still strong.”

A day earlier ratings agency Moody’s adjusted China’s 2017 growth expectation to 6.8 percent based on the first and second quarter — which both came in at 6.9 percent.

But less stimulus will be available as the country looks to adopt stricter financial regulations aimed at controlling leverage, warned company vice president Madhav.